Daiichi to book $3.86 bn loss to buy Ranbaxy
Japanese drug major Daiichi Sankyo, which acquired 63.92 per cent stake in Ranbaxy for $4.6 billion (around Rs 23,000 crore), said that the transaction would result in a valuation loss and and a one-time write-down of $3.86 billion for Daiichi for the third quarter ended December 2008.
“On a non-consolidated basis, Daiichi Sankyo plans to record a non-cash valuation loss of $3.86 billion (¥359.5 billion) on its shares in Ranbaxy to reflect a more than 50 per cent decline in the market value of these securities versus the purchase price,†the company stated today.
On a consolidated basis, Daiichi estimates a non-cash loss of $3.8 billion (Â¥354.0 billion).
The company said it sees no impact on its forecasts for non-consolidated net sales, operating income or ordinary income for the fiscal’s third quarter as a result of these anticipated extraordinary losses.
“The company also sees no impact on cash flow. However, these items will have a significant negative impact on the company’s consolidated net income forecast for for the nine-month period ended December 2008 and for FY09 ending March 2009,†it stated.
However, Daiichi said it considers investment in Ranbaxy as essential for ensuring sustainable business growth and for fully realising the group’s long-term business strategy.
“Daiichi remains absolutely committed to pursuing its unique hybrid model dedicated to the needs of patients in developed and emerging markets. Those needs encompass innovative new medicines and established off-patent products,†it stated.
Industry sources termed Daiichi decision as a fiscally prudent measure taken during a turbulent time. It has no impact on Ranbaxy, they added. The Japanese major had announced the completion of Ranbaxy acquisition in November 2008.
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